Does your stock qualify for QSBS?

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Section 1202 can wipe out federal tax on up to $10M ($15M post-2025) of gain. Check the six tests in 60 seconds.

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Estimates only. Not financial advice.

Qualifies

Full federal exclusion of $5M

All §1202 tests pass and you've held 5 years. Your entire $5M gain is federally tax-free.

Excluded gain
$5M
Federal tax saved
$1.2M
Taxable gain
$0
Per-issuer cap
$10M
California does not conform to §1202 — your full gain is taxable at the state level.

Qualification checks

  • ✓
    US C-corporation
    C-corps qualify. S-corps, LLCs, partnerships, and foreign entities do not.
  • ✓
    Original-issuance acquisition
    Stock acquired directly from the company qualifies.
  • ✓
    Gross assets ≤ $50M at issuance
    Issuer was under the $50M aggregate gross-assets ceiling.
  • ✓
    Qualified trade or business
    Software, manufacturing, biotech R&D, retail, and similar trades qualify.
  • ✓
    80% of assets in active business
    At least 80% of corporate assets used in the qualified active trade.
  • ✓
    Held at least 5 years
    5.0 years held — 100% exclusion tier.

Estimates only. §1202 has subtleties this checker doesn't cover (rollover, redemption, partnership tacking, repurchases). Run any real plan past a tax pro.

What this calculates

  • Whether your stock clears the six §1202 tests: US C-corp issuer, original-issuance acquisition, ≤ $50M / $75M gross assets, qualified trade, 80% active-business test, 5-year hold (or 3/4/5 tiers under OBBBA).
  • Your exclusion percentage by era: 50% (1993–2009), 75% (2009–2010), 100% (post-2010), and the OBBBA tiered exclusion for stock acquired after July 4, 2025.
  • Per-issuer cap: the greater of $10M ($15M for OBBBA-era stock) or 10× your adjusted basis.
  • Federal capital-gains tax saved at the 23.8% LTCG + NIIT rate.
  • State conformity flag for CA, NJ, PA, MS (and partial conformity for AL, HI).

Doesn't cover §1045 rollover, §1244 stock, repurchases, redemptions, partnership tacking, or convertible-note nuances. Run any plan past a tax pro.

Read the deep dive: QSBS gives millions tax-free. Five ways to lose it anyway. →

Methodology

Optimization. Evaluates Section 1202 qualified small business stock against the eight statutory tests, returning the exclusion percentage, federal tax saved, and state conformity under OBBBA 2026 tiered exclusion rules. The result is the globally-optimal answer across the search space, not a heuristic or a sample. Same inputs return the same answer, so the recommendation is verifiable.

Tax-code coverage. Full federal code (ordinary brackets, long-term capital gains, AMT with credit recovery, FICA, Net Investment Income Tax) plus all 50 states and DC for state ordinary brackets and LTCG treatment. State AMT modeled for CA, NY, MN. Brackets reflect IRS Rev. Proc. 2025-32 and the One Big Beautiful Bill Act (OBBBA) provisions for tax year 2026. Validated against 870+ unit tests covering bracket math, AMT credit recovery, state conformity, and the optimizer's search path.

Why use an optimizer rather than asking an LLM to do the math: a benchmark of five frontier large language models on the same multi-year ISO problem found that all 15 trials overshot the achievable after-tax outcome by 2x to 20x (HackerNoon write-up).

QSBS is one slot in a bigger plan.

OptionsAhoy lines up QSBS exclusions, AMT credits, and the rest of your equity decisions across multi-year scenarios. Free during beta.

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